2. Concepts Several strategic tools are used to determine whether a firm has achieved competitive advantage. These most tools are SWOT analysis, value chain analysis, and competitive advantage analysis. Each of the tools involved a number of concepts. This section will define the key concepts involved in the SWOT analysis, the value chain analysis, and competitive advantage analysis.
2.1. SWOT analysis SWOT analysis is a strategic tool used to examine external forces and internal resources in order to determine a firm’s ability to respond effectively to the requirements of its external environment. The concepts related to external forces are defined first, followed by the concepts of the internal resources. The purpose of the external analysis is to identify opportunities (O) and threats (T) in a firm external environment. Opportunities are external factors that a firm can take advantage of to accomplish its objectives. Threats are external factors that can limit a firm’s ability to achieve its objectives. Both opportunities and threats can be either industry or general forces. The purpose of the internal analysis is to identify strengths (S) and weaknesses (W) in a firm’s internal organization. Strengths are internal resources and competencies that a firm can effectively use to achieve its objectives. Weaknesses are internal resources and competencies that undermine a firm’s ability to achieve its objectives. Both strengths and weaknesses can be tangible resources, intangible resources, or organizational capabilities.
2.2. Value chain analysis Value chain analysis is a strategic tool used to examine a firm’s competencies in order to identify the activities that a firm should perform to create the most value and achieve competitive advantage. A competency is an activity that is performed very well. A core competency is an activity that is central to a firm’s survival. A distinctive competency is an activity that a firm performs better than any of its competitors. A firm can create the most value (low cost and/or differentiation) when it performs the activity that is both a core and a distinctive competency. A firm that creates the most value is in a position to achieve a competitive advantage.
2.3. Competitive advantage analysis Competitive advantage is a set of value-creating strategies that are unique and that result in above-average returns in the long-term. To create the most value and therefore achieve competitive advantage, a company must excel in efficiency and process innovation (if the value sought in low cost), or quality and product innovation (if the value sought is differentiation). An effective competitive advantage analysis should be based on the conclusions provided by both the SWOT analysis and the value chain analysis. The outcome of the competitive advantage analysis will be the determination of whether a company has or has not achieved competitive advantage. Such determination will constitute the basis for formulating strategies necessary to either sustain existing competitive advantage or create competitive advantage.
3. Analysis The report will now apply the concepts above to the case of Boeing. This analysis will help determine whether the company is in good standing to fully sustain its competitive advantage over its competitors.
3.1. Boeing’s SWOT analysis This technique is based around the assumption that an effective strategy derives from a “fit” between a firms internal analysis (strength